Wednesday, December 21, 2011

A lot of people are talking about this Alex Tabarrok post about high skilled immigration. He makes a lot of good points in it, but I have a hard time getting worked up about this issue the way people seem to on either side of it (and, being in the "we don't have a shortage of scientists and engineers" crowd myself, I know people that I respect a lot that are on the other side from Tabarrok too).

First, he makes a very important point about how imbalanced our student visa policy is. Schools have a huge incentive to accept foreign students because they are a cash cow for the school, and a lot more student visas are issued each year than work visas. That means we're training a lot of foreign students who are actually displacing potential American students* without giving them sufficient work opportunities here after they graduate.

So how much work opportunities should we offer to high skill immigrants? I'm pro-immigration, but I have to say I don't share Tabarrok's enthusiasm for weighting the immigration system towards high-skill immigrants. Perhaps that would make sense if we were Canada, Australia, or the UK, but a lot of the demand for entry into the United States comes from Central and South America, from lower-skill populations, and it seems foolish ignore that. We have a family-based immigration system for a reason - because we want to be a place where everyone can come and succeed and assimilate, not just the cream of the crop. These work visas are typically temporary visas. I have a hard time privileging a temporary person here for work when there's strong demand from our neighbors to the south to actually come here and be a permanent part of the society.

I do think a point system makes sense - much more sense than the bizarre collection of quotas we have now, and I do think skills should be a part of that point system, but I still think it makes sense to weight it towards a family based policy that encourages people who want to be citizens here to come.

A lot of the support for the sorts of policies Tabarrok proposes comes from people who think that there are persistent shortages of scientists and engineers, and that the labor market for scientists and engineers doesn't work. I don't know if Tabarrok shares that view, but decades of research have demonstrated that these fears are unfounded. A potential problem we do have that impacts this workforce is that certain research, development, and investment is underproduced because of very well understood externalities. The social demand for a lot of R&D and a lot of investments is greater than the private demand. But the solution to that isn't to throw more supply of a particular factor of production (in this case, high skill labor) at the existing private demand - it's to actually introduce the social demand into the market (in whatever way seems most appropriate), and let markets determine the supply quantity and price of these factor inputs.

An immigration system that is weighted towards high skill workers distorts the market price of high skill workers. Our basic immigration system does not discriminate on the basis of skill level - high skill immigrants can come in through it just like low skill immigrants. Tabarrok and others want to put their thumb on the scales and expand an existing visa that privileges high skill workers over low skill workers. That seems unwise to me. We ought to open our borders to people that want to be Americans in whatever orderly fashion we all agree on, and let labor markets sort out the skill composition of those new Americans.

UPDATE: Which is not to say I'm opposed to grabbing rents when they are there to be grabbed. Project Paperclip, in my view, was a very good idea. I suppose I just see a difference between grabbing a couple hundred rocket scientists that the Soviets are gunning for on the one hand, and greasing the tracks for hundreds of thousands of college grads just because they're college grads. We need flexibility and discretion. There are definitely rents to be had and I'm a realist and completely in support of grabbing those rents. What makes me queasy is the sort of market intervention that would heavily tip the scales towards a motley crew of (non-rocket scientist) college grads and not giving the same opportunity to lower skilled workers to our south. And like I alluded to - this sort of distortion implicit in "stapling a green card to their degree" makes me even more queasy, given the large group of Americans who aren't getting degrees for various reasons (but could).

* This is not a trivial issue at all, given how underrepresented domestic minority students are in STEM fields.